Reversing the taxation of health card premiums and director’s fees under RMC 50-2018

(Revenue Memorandum Circular No. 96-2018, November 29, 2018)

Pursuant to RMC 96-2018, premiums paid for group health insurance shall not be subjecto to Withholding Tax on Compensation nor Fringe Benefits Tax (FBT).  Director’s fees, on the other hand, shall not be subject to business tax (VAT or percentage tax).

The Bureau of Internal Revenue (BIR) has deleted Q7/A7 and Q34/A34 in RMC 50-2018 pertaining to the taxation of health card premiums paid by employers for their employees, and director’s fees. 

Q7/A7 of RMC 50-2018 provides that premiums on health cards paid by employers for their employees, whether managerial or rank and file, under group insurance shall be subject to the P90,000 threshold for tax-exempt benefits, which suggests that the amounts shall be considered as taxable compensation.  Premiums paid for individual employees with managerial/supervisory positions (not part of group insurance) shall be subject to fringe benefits tax.

Q34/A34 on the other hand, provides that director’s fees shall be subject to withholding tax on professionals and the applicable business tax, if any.

The BIR noted that RMC 50-2018 was issued to clarify the provisions of the TRAIN law.  The taxation of health card premiums and director’s fees, however, were not tackled in the TRAIN law.